Think Big, Buy Small An Experienced Lender’s Perspective on Acquisition Financing
Sep 29, 2025
Bruce Marks, an experienced lender and founder of a search fund lending practice, shares insights on SBA-guaranteed acquisition financing. He reveals his strategies for assessing deal structures and emphasizes the importance of cash flow for debt service. Bruce explains the advantages of combining SBA loans with conventional financing and discusses the significance of understanding sellers' motivations. He also highlights crucial underwriting filters and the role of personal guarantees in keeping entrepreneurs engaged, making this a must-listen for aspiring searchers.
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Prioritize Coverage, Not A Fixed LTV
- Structure deals to ensure clear debt-service coverage and de-risking before maximizing loan size.
- Allocate enough room for a J-curve and ensure repayments are sustainable.
Equal-Footing (Peri-pusu) Financing
- Peri-pusu lending pairs SBA and conventional loans on identical terms to cover funding gaps.
- The bank's additional tranche must have equal rate, term, and amortization as the SBA piece.
Calculate Coverage On After‑Tax Cashflow
- Use after-tax cashflow (EBITDA minus CapEx and distributions) to calculate debt-service coverage.
- Target at least a 1.35x coverage and model forward-looking growth and working capital needs.